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To What Extent Did Marshall Plan Aid Promote Economic Recovery
And Development In Western Germany?
Our essay will be analysing to what extent Marshall Plan aid promoted economic
recovery and development in Western Germany from its development in 1947 to its
end in 1952.1 The Marshall Plan was an Economic Recovery Programme (ERP)
implemented by the United States of America in 1947 by George Marshall.2 In our
research we assess the impact of the Marshall Plan’s direct and indirect influences
on Western Germany’s economy and society. We perceive the direct influences of
the Marshall Plan as being the direct financial capital invested within the German
economy and the indirect influences as being the political integration and trade
relations which arose from the Marshall Plans implementation by the United States.
Our hypothesis derived from our research is that the Marshall Plan did promote
economic recovery and development in Western Germany post-WWII. However the
extent to which the Marshall Plan achieved economic recovery and development is
overemphasised, as Germany would have experienced economic growth and
recovery post-WWII without the Marshall Plan; although slower and in a less
Keynesian manner.3 Furthermore we view the Marshall Plan as an instrument for
that of which the United States enabled to gain greater economic and political
leverage within war-torn nation’s post-WWII in order to serve the US’s own self-
interests; the US’s self-interests included the pacifying of Germany, creating greater
economic and political stability within Europe through political integration and
improving trade relations.
1 Hogan, Michael J. ‘The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947-1952’, (Cambridge: Cambridge University Press, 1989).
2 Hogan, The Marshall Plan.
3 Maier, Charles S., & Bischof, Gunter. ‘The Marshall Plan and Germany: West German Development within the Framework of the European Recovery Program’. (New York: Berg, 1991).
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Historians have conflicting views regarding the period of 1945-1955 in terms of
Germany and the Marshall Plan; here are the key views we encountered during our
research. The general perception of the Marshall Plan aid was that it provided
monetary support for economic growth and historians from the 70s largely agree
upon this.45 More recent researchers, however, suggest otherwise. Lucrezia Reichlin
uses a table created by the UN for an economic survey of Europe in 1948 and points
out that by 1948 most European countries, with the exception of Germany, had
surpassed production levels of 1938. Maier has made an argument that the political
integration that the Marshall Plan promoted had a larger impact than any financial
effects.6 Raymond Stokes suggests that the industry was not in as destroyed a state
as it was originally believed, although some of the machinery was outdated. 7 Smith
discusses the disruptive impact of denazification, decartelization and demilitarization
had on the economy in the 1945-1948 period.8 This study analyses evidence that
suggests the Marshall Plan never intended to work simply as an economic recovery
plan, but rather as a foreign policy to encourage integration between Western
European countries.
Furthermore, Werner Abelshauser argues that the main benefit of the Marshall
Plan to West German trade was its political backing that allowed for West Germany
4 Kindleberger, C. P., ‘The American Origins of the Marshall Plan: A view from the State Department,’ in S Hoffmann and C Maier (eds.), The Marshall Plan: A Retrospective, London: Westview Press 1984, pp. 7-14
5 Bailey, T.A., (1977), The Marshall Plan Summer, Stanford: Hoover Institute Press.
6 Maier, C., In Search of Stability, Cambridge University Press, pp. 121-184
7 Stokes, Raymond G. ‘Technology and the West German Wirtschaftswunder.’ Technology and Culture32, no. 1 (1991): 1, pp. 1-32
8 Smith, E. O., (1994) The German Economy, Routledge
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to integrate and flourish in international markets.9 He also states that in the period of
1947-1948, foreign trade became a greater part of Germany’s economic growth,
however it has been stated that this was not attributed to the Marshall Plan but
instead to the shift of the United States’ stance in Europe, which would in turn
promote West German economic growth and develop freer trade.10 Moreover, Alan
Milward states the financial gain in the international market at the time was
significant in Western Europe which greatly benefited West Germany due to a
‘protectionist framework which the Marshall Plan had created.’ 11 This was
demonstrated when the possibility of losing Marshall Plan funding spurred Western
European countries to comply with the trade liberation goals of the United States,
and so tariffs and other trade restrictions were reduced or completely removed.12
However Manfred Knapp, Wolfgang F. Stolper and Michael Hudson argued that by
1949, although West Germany’s recovery was well under way and international trade
was expanding, high volumes of their import surplus was still financed from aid
programmes including the Marshall Plan.13 Hence in order to develop and rebuild
West German trade, the financial aid provided by the Marshall plan could have been
9 Werner Abelshauser, ‘West German Economic Recovery, 1945-1951: A Reassessment’, in ‘The economic development of Germany since 1870, vol.2’ edited by Wolfram Fischer (Cheltenham: E. Elgar Pub., 1997.), p.190.
10 Werner Abelshauser, ‘American Aid and West German Economic Recovery: A Macroeconomic Perspective’, in ‘The Marshall Plan and Germany: West German development within the framework of the European recovery program’ edited by Charles S. Maier; with the assistance of Gunter Bischof (New York, N.Y.; Oxford: Berg, c1991.), p. 381.
11 Alan S. Milward, ‘The Marshall Plan and German Foreign Trade’ in The Marshall Plan and Germany: West German development within the framework of the European recovery program’ edited by Charles S. Maier; with the assistance of Gunter Bischof (New York, N.Y.; Oxford: Berg, c1991.), p. 476.
12 Manfred Knapp, Wolfgang F. Stolper and Michael Hudson ‘Reconstruction and West-Integration: The Impact of the Marshall Plan on Germany’. In Journal of Institutional and Theoretical Economics, 137(3) (September 1981), pp.427-428. Retrieved from http://www.jstor.org/stable/40750368
13 Manfred Knapp, Wolfgang F. Stolper and Michael Hudson ‘Reconstruction and West-Integration: The Impact of the Marshall Plan on Germany’. In Journal of Institutional and Theoretical Economics, 137(3) (September 1981), p.424. Retrieved from http://www.jstor.org/stable/40750368
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crucial. However, Michael Hogan argues that it was not the financial backing of the
Marshall plan that was crucial in improving and invigorating West German trade but
rather it was the greater integration and access into wider European markets due to
West Germany being a key part of the United States political agenda in Europe.14
Another important political event was that of the Soviet Union rejection to the
Marshall Plan; many historians viewed this as one of the key historical events in post
war Europe. For many historians, it was the start of the Cold War and the Iron curtain
between East and West.15 As a result of the division after World War II, East
Germany and West Germany, were both located on opposite sides of the iron
curtain, and both were influenced by the implementation of Marshall Plan and the
political tension created by it. On the East German side, the nation was under the
control of Soviet Union, and therefore affected by Soviet’s reaction to the Marshall
Plan: the Molotov Plan, which criticized by many early historians as the tool of USSR
based on its self-interest and ambitious to control Europe.16 However, Zauberman’s
research on Eastern European pointed out that East Germany did achieve
considerable economic growth during the Molotov Plan time.17 On the West German
side, the economic progress was rapid, but it was also suffered from the blockade of
East-West trade.18
14 Michael J Hogan, ‘The Marshall Plan: America, Britain, and the reconstruction of Western Europe, 1947-1952’ (Cambridge: Cambridge University Press, 1987). Retrieved from http://hdl.handle.net.ezproxy.lib.gla.ac.uk/2027/heb.00258.0001.001
15 Roberts, G. (1994). Moscow and the Marshall plan: Politics, ideology and the onset of the cold war, 1947. Europe‐Asia Studies, 46(8); Narinski, M. (1993) The Soviet Union and The Marshall Plan; Di Biagio, A. (1996). The Marshall Plan and the Founding of the Cominform, June–September 1947. In The Soviet Union and Europe in the Cold War, 1943–53 , p 208-211. Palgrave Macmillan UK.
16 Berger, M. (1948). How the Molotov Plan Works. The Antioch Review, 8(1), p 17-25
17 Zauberman, A. (1964). Industrial Progress in Poland, Czechoslovakia, and East Germany, 1937-1962.
18 Diebold Jr, W. (1948). East-West Trade and the Marshall Plan. Foreign Affairs,26(4),
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Our research focused on the period from 1947 to 1952 in order to accurately
analyse the change in time factor of the Marshall Plan. We concentrated our
research in the areas of German industry development, international trade, food
imports and production, along with the USSR’s response to the United States
Marshall Plan and comparison of Western Germany to that of the Eastern zone
under Soviet management. In order to accurately determine the change over time in
different Western Germany industries, labour markets and the Marshall Plan we
examined the primary source documents of the Monthly Reports of the American
Military Governor held on microfilm by the University of Glasgow Library. These
Special Reports on Western Germany by the Federal Ministry of the Marshall Plan
enabled our research to have a comparative statistical analysis of Western Germany
prior to the Marshall Plan’s implementation and post-implementation. Although, this
does give us a one sided view of the situation, as those documents created by
Occupying forces in Germany to be sent back to the United States are obviously
going to concentrate on the positive aspects of the current situation, and was a form
of self-promotion. We combined these primary sources with those of the Office of the
Military Governor for the United States’ Surveys, thus giving us an idea of the
feelings of the general population, even though this is still restricted to the American
zone. Lucius Clay’s personal reports on Western Germany’s progress under his time
governing the US’s zone were often confidential and private, enabling us to have an
insight into what would have been said by those with authority in Western Germany
behind closed doors. Although these reports are significant sources for
understanding the Marshall Plan’s effect on West Germany they are a relatively one
sided source in terms of Marshall Plan promotion and positivity, as they are
produced and written from an American perspective about the American Zone in
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particular. We combine these primary sources with that of the United Nations
Economic Commission for Europe’s bulletin enabling our research to gain a wide
and in-depth analysis of the US’s zone and Western Germany as a whole. The
reliable primary sources about economy and society in East Germany is limited. The
official data and statistic from USSR and Eastern German government were heavily
biased due to the political reasons. More realistic data was edited by western
economists, which were also biased and considered as secondary sources. The
primary sources used in this article for East Germany and the German Democratic
Republic, includes the trade status, industrial output, and agricultural production,
from the United Nation Economic Commission for Europe, which was the biggest
English sources of economic statistics in socialist countries after the war. Most of the
data were direct and investigated by economists from both Western countries and
Socialists countries. Our research covered German industry, trade, housing,
unemployment, foodstuffs and the comparison to that of USSR’s Molotov Plan.
The Marshall Plan was an Economic Recovery Programme, which aimed at
removing hunger, poverty, desperation and chaos from war-torn Europe.19 During
WWII Germany’s infrastructure and industry had been severely damaged like many
European nations; reducing Germany’s production capabilities to such an extent it
was seen as unable to be a self-sustaining state.20 The Marshall Plan was seen as
the needed aid which would enable economic and political stability to be re-
19 Maier & Bischof, The Marshall Plan and Germany.
20 ‘Revised Plan for Level of Industry in the Anglo-American Zones (August 29, 1947), in United States Department of State, Germany 1947-1949: The Story in Documents.’ (Washington, DC: U.S. Government Printing Office, 1950), p. 358; reprinted in Beata Ruhm von Oppen, ed., Documents on Germany under Occupation, 1945-1954. (London and New York: Oxford University Press, 1955), pp. 239-45.
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established in war-torn Europe. It was on these grounds that Economic Recovery
Programme was only available for European nations and the West German zones.
Before our analysis of the Marshall Plan and the extent to which it caused economic
development and recovery can begin we must first explain Germany’s situation and
background in the build up to its implementation.
On the 8th ofMay 1945 Germany surrendered unconditionally to the Allies (Britain,
France, the United States and the Soviet Union). 21 As predetermined in the Yalta
and Potsdam conferences, on the 5 June 1945 Germany was occupied in four
separate zones.22 Each zone was governed by one of the Allied nations.23 The
agreement of four separate zones instead of three had been determined at the early
February Yalta conference in 1945.24 It was there that Britain and the United States
argued for France to have their own zone in the newly defined borders of Germany. 25
Originally France was not going to be given the opportunity of having its own zone,
as France had surrendered early in the war and Stalin viewed the French as being
cowardly and weak; not a nation Stalin would desire in the occupation of Germany.26
It was Britain and the United States that argued for France’s position in the
occupation. The United States saw France as a potential ally against the increasing
risk of communism. Both the Yalta and Potsdam conferences outlined what would
21 ‘Germany - Postwar Occupation and Division’, Washington: GPO for The Library of Congress, 1995. http://countrystudies.us/germany/44.htm, accessed on the 20th of November 2015.
22 Germany - Postwar Occupation and Division, The Library of Congress.
23 Germany - Postwar Occupation and Division, The Library of Congress.
24 ‘Report of the Crimea (Yalta) Conference (February 4-11, 1945)’, Cmd. 6598; reprinted in Beata Ruhm von Oppen, ed., Documents on Germany under Occupation, 1945-1954. (London and New York: Oxford University Press, 1955), pp. 4-6. http://germanhistorydocs.ghi-dc.org/docpage.cfm?docpage_id=2961
25 Report of the Crimea (Yalta) Conference (February 4-11, 1945).
26 Report of the Crimea (Yalta) Conference (February 4-11, 1945).
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be managed after the war was over and to what extent. It was only in March 1946
that the four occupying powers adopted a plan for how Germany would operate post
WWII;27 this plan was called the Potsdam Program. The Potsdam Program of
demilitarization, denazification and economic decentralization was thus a
compromise, based on the contradictory desires to weaken, punish and restructure
Germany at the same time.28 The aim was to remove Germany’s war potential,
provide reparations and yet leave Germany with enough capability for the rebuilding
of a viable and peaceful economy.29 Germany’s reparations were deemed necessary
for the general rehabilitation of Europe after WWII’s destruction, although this time
they were paid in resources rather than currency.30 On par with removing Germany’s
potential for war, the Allies controlled the businesses and industries which controlled
the military production within Germany; helping to relieve France’s concerns of
Germany regaining its military might and economic dominance in the region.31
The Potsdam programme included the loss of Germany’s Eastern territories to
Poland, and that of being occupied and governed by 4 separate nations. This led to
economic instability within Germany as its industry and infrastructure had been
damaged during the war to that of levels severely lower than that of pre-war output;
27 ‘Revised Plan for Level of Industry in the Anglo-American Zones (August 29, 1947), in United States Department of State, Germany 1947-1949: The Story in Documents.’
28 Jarausch, Konrad Hugo. ‘After Hitler: Recivilizing Germans, 1945-1995’, (Oxford: Oxford University Press, 2006), p. 97.
29 ‘Revised Plan for Level of Industry in the Anglo-American Zones (August 29, 1947), in United States Department of State, Germany 1947-1949: The Story in Documents.’
30 ‘Communiqué on Discussions between Representatives of the United Kingdom, United States, and French governments in London, Relating to the Level of Industry in the Combined Anglo-American Zones and the Management and Control of the Ruhr mines (August 28, 1947), in United States Department of State, Germany 1947-1949: The Story in Documents’. (Washington, DC: U.S. Government Printing Office, 1950), p. 356; reprinted in Beata Ruhm von Oppen, ed., Documents on Germany under Occupation, 1945-1954. (London and New York: Oxford University Press, 1955) pp. 238-39.
31 Report of the Crimea (Yalta) Conference (February 4-11, 1945).
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the separation of land and the loss of eastern territories also made Germany’s ability
to feed its population near impossible. This resulted in the United States having to
provide aid in order to prevent the spread of disease and famine in the country; this
aid was called Government Aid and Relief in Occupied Areas (GARIOA).32 GARIOA
was predominately foodstuff aid to the occupied zones in Western Germany.33 The
German economy was in such a disarray post-WWII that many Germans sought
cigarettes instead of currency between the periods of 1945-1948, as their economy
was mainly based on bartering and compensation trade.34 It was only in 1948 that
the United States established a new currency in their zone, called the
Deutschmark.35 The establishment of the Deutschmark helped encourage workers to
return to work and removed the need for compensation trade within Germany,
helping stabilize the markets.
It was these economic instabilities that were sought to be removed through the
adoption of the Marshall Plan and the use of the Economic Recovery Programme.
The Marshall Plan was developed by George Marshall, the Secretary of state for the
United States. Marshall put forward the aims and method for the Marshall Plan in his
address to the University of Harvard’s alumni in June 1947.36 Marshall put forward
his plan to help rebuild Europe after realising, through his negotiations with the
32 ‘Reports of The Military Government For Germany, U.S. Zone, 1945-1953.’ (1983. Glasgow. Scholarly Ressources Inc.) University of Glasgow Library, Reel 6. Thereafter known as ‘Monthly Reports’.
33 Monthly Reports, Special Report, Reel 6.
34 Henderson, David R. ‘German Economic Miracle’: The Concise Encyclopedia of Economics. Accessed November 20, 2015. http://www.econlib.org/library/Enc/GermanEconomicMiracle.html.
35 ‘Extracts from the British Military Government Law No. 61: First Law for Monetary Reform (Currency Law) (June 20, 1948)’, Military Government Gazette, No. 25, p. 848; reprinted in Beata Ruhm von Oppen, ed., Documents on Germany under Occupation, 1945-1954. (London and New York: Oxford University Press, 1955), pp. 292-94.
36 Maier & Bischof, The Marshall Plan and Germany.
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USSR, that the Soviets did not seek to rebuild Europe but sought to instigate chaos
through doing nothing.37 Marshall perceived this approach as a strategy for which
would encourage the seeds for communism to spread in war-torn Europe.38 It is this
realisation that made Marshall and the United States aware of the need for aid in
Europe in order to restore economic and political stability in the region.39 Following
Marshall’s interpretation of the Soviets’ foreign policy, the United States
administration deemed there to only be two options available with regards to Europe.
One was to abandon Europe to the USSR’s sphere of influence or the other was to
continue the US’s involvement in European affairs and help finance the rebuilding of
war-torn Europe.40 After Marshall’s Harvard address, the United States
administration began planning what the Marshall Plan would entail. In its initial
announcement, 22 European nations were invited by the United States to join the
Marshall Plan; this included Eastern Soviet nations and that of the USSR.41 Initially
the USSR was keen on joining and using the funds to rebuild its economy and that of
its eastern allies, although this changed later in 1947.42 The Soviets withdrew from
the Marshall Plan, as it was deemed to be a hostile attempt to reduce economic and
political stability of its allies and other nations.43 As a result only 16 out of the initial
22 nations joined the Marshall Plan44 and developed the Committee of European
37 Maier & Bischof, The Marshall Plan and Germany.
38 Maier & Bischof, The Marshall Plan and Germany.
39 Maier & Bischof, The Marshall Plan and Germany.
40 Maier & Bischof, The Marshall Plan and Germany.
41 Maier & Bischof, The Marshall Plan and Germany.
42 Read, Christopher. ‘The Stalin Years: A Reader’. Houndmills, Basingstoke, Hampshire: (Palgrave Macmillan, 2003).
43 Maier & Bischof, The Marshall Plan and Germany.
44Read, The Stalin Years.
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Economic Cooperation (CEEC).45 The Western German zones were included in the
CEEC and participated in the Economic Recovery Programme.
During 1947 the British and United States zones were combined to form the
Bizonia.46 This was a result of Britain’s financial burdens associated with operating
the zone. Britain’s zone demanded a large proportion of foodstuffs to be imported;
this drained Britain’s financial capabilities in a period where Britain was already
suffering from economic difficulties.47 Later in 1948 France combined their zone with
that of the Bizonia in order to form the Trizona. This improved the efficiency of
economic and administrative processes within the zones.48 The Marshall Plan
benefited Germany through its ability for the United States to impose financial
restrictions in order to better trade relations and political integration in Europe. This
was seen with France and Germany, as France imposed financial restrictions on
Germany’s exports; this was part of France’s aim in extracting as much as they could
from Germany as compensation for WWII.49 The United States were able to impose
political and economic influence over France as they could withdraw parts of the
$13.9 billion which had been made available for Economic Recovery Programme
participants; the United States threatened to impose such restrictions when an ERP
participant such as France had conflicting interests to that of the US. 50 Between the
3rd of April 1948 and the 3rd1 of December 1952, $3.4 billion out of the $13.9 billion
45 Maier & Bischof, The Marshall Plan and Germany.
46 Stokes, Raymond G. ‘Technology and the West German Wirtschaftswunder.’ Technology and Culture32, no. 1 (1991): 1, pp. 1-32.
47 Stokes, Technology and the West German Wirtschaftswunder.
48 Stokes, Technology and the West German Wirtschaftswunder.
49 Stokes, Technology and the West German Wirtschaftswunder.
50 Knapp, Manfred, Wolfgang F. Stolper, and Michael Hudson. ‘Reconstruction and West-integration: The Impact of the Marshall Plan on Germany’. Zeitschrift fur die gesamte Staatswissenschaft / Journal of Institutional and Theoretical Economics 137.3 (1981): pp. 415–433.
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funds were given to Britain, $2.8 billion were given to France and $1.4 billion of these
funds were given to Germany.51
In 1947, the USSR’s rejection of the Marshall Plan was viewed as a rapid change
on the relationship between the Western and Eastern World. Some historians regard
it as the turning point in the development of the Cold War.52 In July 1947, the
absence of the Soviet Union and other Eastern European countries (except Poland
and Czechoslovakia) at the Paris conference actually broke Europe into two blocs:
Capitalist Bloc and Communist Bloc. The limited confrontation escalated into
complete political tension. After the Paris conference, USSR began to tighten the
economic and political relationship among the Eastern European nations. Trade
agreements were signed based on Soviet’s theory of Planned economy, and a
considerable amount of aid was given to several socialist nations, although this aid
was considerably smaller than that of the Marshall Plan’s. The USSR’s plan aimed to
create an alliance among socialist countries and create an enclose trade system,
therefore stopping these countries from relying on American aid. It was called the
‘Molotov Plan’ by the Western world as it was initially designed by Soviet’s minister
of Foreign affairs V. Molotov. In 1949, The Council of Mutual Economic Assistant
(Comecon) was formed in Moscow, the short term aims of ‘Molotov Plan’ were
generally completed.
One of the big questions in regard to Germany was to what extent its economy
and industry recovered post WWII. This was the second time within less than half a
51 Knapp, Stolper & Hudson, Reconstruction and West-integration: The Impact of the Marshall Plan on Germany.
52 Parrish, Scott D, and M. M Narinskii. ‘New Evidence On The Soviet Rejection Of The Marshall Plan, 1947.’ (Washington, D.C.: Woodrow Wilson International Center for Scholars 1994).
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century that Germany had gone to war; making the neighboring countries cautious of
such future conflict if Germany was able to recover again. This is very clear from
General Lucius Clay’s personal documents which cover the period 1945-1949 during
which the General is part of the administration of the United States occupational
zone in Germany and in 1947 becomes the military governor of the zone. He
describes his dissatisfaction with the situation as because of this suspicion of
Germany restrictions were imposed on what industries could be started and what
machinery could be used. These restrictions imposed on Germany included all
equipment and industries which could be used in war-production.53 Lucius Clay
understood the concerns of other countries, but also did not fail to see the bigger
picture, which was that there were implications for a financial crisis and a US
dependent Western European economies, including Germany, did not recover.
Furthermore he recognized a threat in the Soviet Union and felt that the concerns of
a possible German war machine was not as significant a threat as the Eastern Soviet
bloc posed.54 Those views were not his alone as is shown in his letter to a Baruch.55
Although most of the factories and machinery used in the industry were not
destroyed or damaged during the war, they were still outdated and Germany also
lacked the managerial expertise and the production strategies, so the beginning of
the economic recovery of Western Germany was slow. General Clay expressed his
dissatisfaction with production levels and the available expertise of the management
at that time.56 Even throughout 1947, he considered production levels to be low
53 Lucius D. Clay, The Papers of General Lucius D. Clay Germany 1945-1949, Jean Edward Smith ed., vol2., Indiana University Press, 1974, pp. 56354 Clay, The Papers of General Lucius, pp. 56355 Clay, The Papers of General Lucius, pp. 56356 Clay, The Papers of General Lucius, pp. 56614 | P a g e
although improving.57 It was as early as March in 1948 that the General was
becoming satisfied with the levels of production while emphasizing his previous
concerns for German management.58 There is also evidence that he had employed
the use of United States experts in different industries to help stabilize and improve
both the technical and operational part of organizations.59 This suggest that even
before the Marshall Plan was introduced steps were being made towards economic
recovery in Western Germany. What was lacking was an improvement in
international relations and trade. General Lucius Clay brings up this concern in many
of his documents, two of the brightest examples being when he stated his goal to put
the control of exports and imports in German hands before he retired and when he
expressed his dissatisfaction with the quotas being imposed on German steel
exports and suggested that they only stagnate the economic recovery.6061
It is just in the summer of 1948 that Marshall Plan Aid was first introduced to
Western Germany. Expectations would be that an economic boom should follow,
however the following evidence suggest the opposite. As seen in the figure bellow
there was notable improvement in production in 1948 and some improvement in
1949 which was the year with the largest amount of Marshall Plan Aid received. In
1949, most western European countries reached the same production levels as they
achieved in 1936 with Germany only slightly lagging behind. However, it is not until
1950 and 1951 that Germany experienced a large increase in output and expansion
of the industry, reaching its peak in the final quarter of 1951 and then still maintaining
57 Clay, The Papers of General Lucius, pp. 56658 Clay, The Papers of General Lucius, pp. 56659 Clay, The Papers of General Lucius, pp. 65960 Clay, The Papers of General Lucius, pp. 56661 Clay, The Papers of General Lucius, pp. 93115 | P a g e
high production levels in the first quarter of 1952 which are also the least productive
due to seasonal change. Furthermore Lucius Clay himself brings up the fact that
aside from Marshall Plan aid the USA had invested $700 million per year in German
economic recovery which further contributes to the argument that it is not the
financial part of the Marshall Plan Aid that is a stimuli for economic recovery.62
Figure 1: Production output levels for 1936
62 Clay, The Papers of General Lucius, pp. 57016 | P a g e
(Source: Special Reports, First Report, Reel 6, p.22)
These figures all point toward the same conclusion. The Marshall Plan Aid,
while providing funds for economic recovery, actually played a more political role. In
fact the USA was already providing funds for Germany. An overarching theme in the
reports of General Lucius is the stability of the political and trade situation in Europe,
as well as the restrictions imposed on the German economy which he believes only
stagnated the recovery of the German and by extension the Western Europe
economies.63 This stagnation and these restrictions, General Clay believes, ignore
the bigger threat of the Soviet Union which in his views should be the main concern
of all Western countries.64 On the other hand there is also the issue that if European
economies had failed they would have been dependent on the United States which
63 Clay, The Papers of General Lucius, pp. 93164 Clay, The Papers of General Lucius, pp. 56317 | P a g e
could not initially sustain them. The figures above and the General’s personal
thoughts suggest that before the Marshall Plan’s implementation it was not the
funding which held Germany’s economy back but rather the international relations
post WWII which hindered Germany’s industry. The Marshall Plan, however, helped
improve those relations and improve the trade flow between Western countries
which has a much bigger influence on stabilizing economies than simply investing
into them. This position is further supported when analyzing the Marshall plan’s
effect on the recovery of West German trade.
Despite the Marshall Plan’s impact on the West German industry as analysed
previously, the implementation of the Marshall Plan on West Germany’s trade has
been argued to be considerably more important in Germany’s economic recovery
and development. The key source used to research the Marshall plan and its effect
on West Germany trade was taken from the governor’s reports which covered the
years before and during the implementation of Marshall Plan, which included various
critical areas that directly impact trade. In 1945 the reports of the military governor in
July concluded that West German trade was extremely limited and in much needed
restoration and growth.65 This shows that directly after the war, Western Germany
was in a critical state in terms of trade, and needed a significant amount of effort in
order to restore it. Reports from August 1946, stated that although growth in exports
was visible, it was still not significant enough to match the value of imports at that
time.66 This continues to show that the early post war years was a crucial time period
for West German trade, as significant funding was needed to establish a supply of
65 Monthly Reports, Reel 1, August 1945, p.33.
66 Monthly Reports, Reel 1, August 1946, p.12.
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imports. This was predominately due to West Germany’s economic standing within
Europe having been severely reduced post World War Two, along with its ability to
export.
The table below gives a general overview of how imports were financed
during the years following the implementation of the Marshall Plan.
Table 1: Share of Various Financing Sources in Total Imports of the Federal
Republic
(Source: Special Reports, Fifth Report, Reel 6, p.29)
From the table above it is clear that the GARIOA aid programme provided by
the United States to West Germany before the Marshall plan, was a greater
proportion of the aid in the beginning years of the implementation of the Marshall
Plan. Though it could be argued that it GARIOA was not vital in terms of the recovery
of trade in West Germany as the aid it provided was only used for importing
19 | P a g e
essentials to sustain the Federal republic such as, food, petroleum and fertilizers.67
Key materials of production that would revitalise West Germany’s industrial capacity
were not to be imported by funding from GARIOA.68 And so this form of aid was not
used for West Germany’s production capabilities. The ERP began in 1948, with a
greater proportion of aid West Germany received from then onwards consisting of
industrial aid than in previous years.69 From this, it can be argued that as GARIOA
began to provide less aid, with the ERP providing a greater proportion of aid, which
then included provisions to promote West German industry, the ERP could have
provided substantial help to re-establish industry and trade. Evidence for the content
of the ERP aid can be provided from the governors reports as of June 1949, Imports
from the ERP were made up of 64% industrial aid and 35% food aid.70 This
continued throughout the Marshall Plan years as of August-September 1949, 72% of
ERP aid was provided as industrial goods, whilst 28% were in direct relation to food
and agriculture,71 showing that key areas of funding from the Marshall Plan, were
directly related to improving industry and therefore the ability of West Germany to
trade.
Table 2: Imports (By Source of Funds), January-June 1949, Bizonal Area
67Nicholas Balabkins, Germany under direct controls: economic aspects of industrial disarmament, 1945-1948 (New Brunswick, N.J.: Rutgers University Press, 1964) p.101.
68 U.S. Office of Military Government, op. cit., No.23 (April-May, 1947), p.14., as cited in Balabkins, Germany under direct controls, p.101
69 Manfred Knapp, Wolfgang F. Stolper and Michael Hudson ‘Reconstruction and West-Integration: The Impact of the Marshall Plan on Germany’. In Journal of Institutional and Theoretical Economics, 137(3) (September 1981), p.423. Retrieved from http://www.jstor.org/stable/40750368
70 Monthly Reports, June 1949, Reel 3, p.64.
71 Monthly Reports, June 1949, Reel 3, p.75.
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(Source: Monthly Reports, June 1949, Reel 3, p.111)
From table 2, West Germany was funding a much higher value of Imports
than any other financing source in terms of the dollar value of these imported goods
and services . This shows that West Germany’s own ability to conduct international
trade, and therefore balance its own trade, became increasingly significant as early
as 1949; strengthening the case that the Marshall Plan had a limited impact through
financing West Germany’s imports. (From the table, Marshall Plan aid is represented
by the ECA funding, ECA being the Economic Cooperation Administration, and the
administrative agency for Marshall Plan Aid.) This further contributes to the limited
effect that The Marshall Plan aid had through funding imports even during the years
where the Marshall Plan was at its peak in terms of aid funding financing.
Highlighting once again that through the most critical years of financial aid provided
by the Marshall Plan, that West Germany was in control of the majority of import
21 | P a g e
financing and so was balancing their trade through their own means. Through the
Marshall Plan years, ERP aid fluctuated but did become a greater proportion of the
financing of Imports as GARIOA was removed. However the funds provided by the
Federal Republic itself, became a much more significant percentage of the financing
and so whilst the Marshall Plan was in full effect, West Germany was taking much
greater control over its own imports and making itself self-sustainable in terms of
trade. Furthermore, it has also been argued that the Marshall plan was too late on
arrival to take credit for the recovery of West Germany, as it has been argued that as
of early 1949, the levels of trade for West Germany had returned to what they were
before the Second World War.72 And so taking this argument we can see that as
Marshall Plan aid took effect in West Germany to supposedly stabilise and promote
trade growth, the recovery was well under way with Germany controlling its own
prospects. From the reports it shows that ERP funding to West Germany in terms of
national product actually fell, as: For ERP year 1948/49, it was 2.8%, Whilst in ERP
year 194950 it was 1.9%,73 This shows an actual fall in terms of the value of aid in
relation to GNP. It therefore can be argued that the direct financing from the Marshall
Plan did not provide significant importance in the recovery of trade in West Germany,
as its value fell throughout its years of implementation as West Germany used its
own capabilities to improve trade. With National product potentially increasing,
citizens of Germany would have contributed more to its domestic trade and so again
with ERP funding reducing through the years, West Germany improved its
capabilities for self-sustainment.
72 Michael J Hogan, ‘The Marshall Plan: America, Britain, and the reconstruction of Western Europe, 1947-1952’ (Cambridge: Cambridge University Press, 1987) p.189. Retrieved from http://hdl.handle.net.ezproxy.lib.gla.ac.uk/2027/heb.00258.0001.001
73 Monthly Reports, Special Reports on the Marshal Plan,Reel 6, 5th and 6th Report, p.34.
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The direct impact of the Marshall Plan can be argued as ineffective and
without great impact, however the indirect impact in relation to trade may have had
substantial significance, as integrating West Germany into international markets with
significant ease of access may have bolstered its trading capacity. This was
accomplished as one of the United States’ main goals through the Marshall plan was
to create a cooperative and integrated Europe; the efforts of this can be seen
through the creation of the Organisation for European Economic Cooperation
(OEEC),74as it was created to oversee the aid provided by the Marshall Plan for
receiving European Countries.75 With the Marshall Plan, West Germany would then
be able to increase its trade with other European nations under a ‘protectionist
framework which the Marshall Plan had created.’ 76 This protection can be explained
through the United States’ willingness to remove the aid provided by the Marshall
Plan of other European countries if they were not willing to lower trade restrictions
against West Germany in order for their political agenda to be realised,77
guaranteeing improvements for West German trade with backing from the United
States with safeguards implemented. This indirect impact of the Marshall plan would
therefore have greatly increased the Federal Republic’s ability to increase its trading
internationally, and to do so with greater freedom. From the reports of Jun 1949, it
shows that the United States’ political influence was an important factor in bringing
74 Daniel Barbezat, ‘The Marshall Plan and the Origin of the OEEC’, in Explorations in OEEC History, ed. Richard T. Griffiths(Paris : OECD Publishing, 2009) pp. 33-34.
75 Wendy Asbeek Brusse and Richard T. Griffiths, ‘Exploring the OEEC’s Past: the Potentials and the Sources’, Explorations in OEEC History, ed. Richard T. Griffiths(Paris: OECD Publishing, 2009) pp.15-16.
76 Alan S. Milward, ‘The Marshall Plan and German Foreign Trade’, in The Marshall Plan and Germany: West German development within the framework of the European recovery program edited by Charles S. Maier; with the assistance of Gunter Bischof (New York, N.Y.; Oxford: Berg, c1991.), p. 476.
77 Manfred Knapp, Wolfgang F. Stolper and Michael Hudson ‘Reconstruction and West-Integration: The Impact of the Marshall Plan on Germany’. In Journal of Institutional and Theoretical Economics, 137(3) (September 1981), pp.427-428. Retrieved from http://www.jstor.org/stable/40750368
23 | P a g e
West Germany into wider markets as discussions with participating countries In the
OEEC had complaints against certain aspects of trading with West Germany.
Though the report states that there was no conclusion to such matters78, without
United States’ involvement such problems may have been more damaging to trade
prospects in West Germany. Hence with a reduced amount of restrictions in terms of
trade against West Germany, only established through the Marshall Plan, export
industries of Germany would be able to flourish and grow in a scale that it could not
have achieved without these indirect means.
Despite the limited direct impact of the Marshall plan on trade and industry,
the ERP was also conceived as a method of obtaining social change, whether this
came from political development or modification of living standards. The
announcement of the Marshall Plan made waves in Europe and created expectation
of what it may bring in both positive and negative ways.
It is interesting to consider West German public opinion in relation to the
Marshall plan, and this is facilitated by the Office of the Military Governor for the
United States which took surveys taken as early as 1946, which reviewed topics
from areas such as opinions on leadership, the food situation and even education79.
They indicate that, when the Marshall Plan was announced, it was perceived as an
overall positive thing for the country’s economy, for the general population’s
prospects and the future of living standards in the country. This positive perception
did decline slightly over time, from 85% thinking that it was a positive initiative in
78 Monthly Reports, June 1949, Reel 3, p.66.
79 Merritt, Anna J, and Richard L Merritt. 1970. Public Opinion In Occupied Germany: The OMGUS Surveys, 1945-1949. Urbana: University of Illinois Press.
24 | P a g e
March 1948, to only 74% being of that opinion only eight months later. However the
perception of the Marshall plan remained positive and help lighten the spirits within
the country.80 Nonetheless, the people polled in the American zone were aware that
there were political motivations behind the Economic Recovery Programme’s
financial assistance and not only humanitarian feelings. In 1948 80% of those
surveyed acknowledged that they thought the Marshall Plan was put in place to stop
communist expansion, 29% to gain allies in case of war with the soviets and 25% to
dump surplus goods produced in America into the West German market. In 1949
29% of the people surveyed went further by saying that it was a way of controlling
economic and political life in West Germany.81 This means that even some of those
who considered the initiative and overall positive attribute to Western Germany
realised the mixed motivation behind it, there was not two distinct negative or
positive camps with an all or nothing approach. What is interesting is that people
thought the currency reform, even though the general public initially thought it was
unnecessary, was probably the reason for the increase in living standards.82 Even
General Lucius Clay describes the onset of the currency reform as ‘’unbelievable’’.83
Furthermore, it is interesting to contrast the opinions of the Marshall Plan with
the effects that it had on the living standards in West Germany. By looking at the
employment rates between 1948 and 1951, one can get a sense of how the
80 Merritt, Anna J, and Richard L Merritt. 1970. Public Opinion In Occupied Germany: The OMGUS Surveys, 1945-1949. Urbana: University of Illinois Press, pp.216, 269,309,313.
81 Merritt, Anna J, and Richard L Merritt. 1970. Public Opinion In Occupied Germany: The OMGUS Surveys, 1945-1949. Urbana: University of Illinois Press, pp.216, 269,309,313.
82
? Merritt, Anna J, and Richard L Merritt. 1970. Public Opinion In Occupied Germany: The OMGUS Surveys, 1945-1949. Urbana: University of Illinois Press, pp.216-217, 294.
83 Clay, Lucius D, and Jean Edward Smith. 1974. The Papers Of General Lucius D. Clay: Germany, 1945-1949. Bloomington: Indiana University Press,Vol.II, p.585.
25 | P a g e
industrial change and innovation trickled down to the people. If one turns to the
reports of the military governor, it is highlighted that the number of employed
increased by 2.5 million from 1938 to 195184, however with a closer look at the
figures provided unemployment had also risen, reaching its peak of 2 million in
February 1950.85 It is true that more people were employed, however because of
immigration, which adds another 9.5 million people to the West German population
and a booming birth rate, the same reports estimate that the total population had
risen from 39.4 million in 1939 and 47.6 million in 1950 in West Germany alone,
which constitutes a 21% increase, meaning that proportionally, unemployment has
risen, as the general population has increased.86
Figure 2: The evolution of employment and unemployment in Western Germany,
from 1948-1951.
84 Monthly Reports, special report on the Marshall Plan, special report on the Marshall Plan, p.121.
85 Monthly Reports, special report on the Marshall Plan, special report on the Marshall Plan, p.123.
86 Monthly Reports, special report on the Marshall Plan, special report on the Marshall Plan, p.119-121.
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(Source: Monthly Reports, special report on the Marshall Plan, special report
on the Marshall Plan, p121)
Furthermore, even in the employed population, the OMGUS surveys highlight that
the earnings and general income of families were reportedly not enough to live on,
and the little saving people still possessed were being dipped into regularly.87 It is
pointed out in the special reports on the Marshall plan that unemployment has
become a systemic problem and that people are now unemployed for a period of six
months or more instead of a short lapse between jobs and was the case previously. 88
For the unemployed section of the population, this makes life more difficult and two
87 Merritt, Anna J, and Richard L Merritt. 1970. Public Opinion In Occupied Germany: The OMGUS Surveys, 1945-1949. Urbana: University of Illinois Press, pp. 131-132.
88 Monthly Reports, special report on the Marshall Plan, special report on the Marshall Plan, p.123-125.
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laws are passed in 1951 which improve provision for them, which lead to a minimum
of a 10% increase in benefits, giving obvious relief to citizens of the country.89
The employment rates have an obvious link to the amount of income available
to families West Germany, thus leading us to consider the provisions of basic needs
such as food, which was provided by a rationing system put in place as early as
1945.90 Lucius Clay considered the food situation to be as good, if not better than
anywhere in Europe.91 Ration sizes evolved from about 1400 calories in 1948, before
the influence of the Marshall plan to a “normalisation” of food consumption in 195192,
which consisted in an increase in quantities and a shift away from a mainly cereal
and starch based diet to a more balanced one, even though elements such as fats
are replaced with cheaper alternatives, consisting in replacing element such as
butter with animal fats.93 However, food is still a primary concern for people
throughout the period, with 40% of people supplementing their diet in 1949.94 This
being obviously easier in rural and especially farming areas with the use of
preserves and a more hunter gatherer approach. Nonetheless 15% of those
surveyed in West Berlin admit to using the black market as a way of sourcing food,
this being the number of those who will admit to these practices on record, to an
official source.95 The Marshall plan, however did not only seek to supplement the 89 Monthly Reports, special report on the Marshall Plan, special report on the Marshall Plan, p.125.
90 Grossmann, Atina. 2011. "Grams, Calories, And Food: Languages Of Victimization, Entitlement, And Human Rights In Occupied Germany, 1945–1949". Cent Eur Hist 44 (01): 118-148, p.120
91 Clay, Lucius D, and Jean Edward Smith. 1974. The Papers Of General Lucius D. Clay: Germany, 1945-1949. Bloomington: Indiana University Press,Vol.II, pp.539-540.
92 Monthly Reports, special report on the Marshall Plan, roll 5, p.57.
93 Monthly Reports, special report on the Marshall Plan ,Fifth and Sixth Report, roll 6, p.57.
94 Merritt, Anna J, and Richard L Merritt. 1970. Public Opinion In Occupied Germany: The OMGUS Surveys, 1945-1949. Urbana: University of Illinois Press, pp. 150-151, 161, 167-168, 191, 213, .
95 Merritt, Anna J, and Richard L Merritt. 1970. Public Opinion In Occupied Germany: The OMGUS Surveys, 1945-1949. Urbana: University of Illinois Press, pp. 150-151, 161, 167-168, 191, 213, .
28 | P a g e
food supply, but also to return West Germany to a position of near self-sufficiency.
By 1951 the Reports on the Marshall plan boast production levels of food reaching
94% of those before the war, however, they forget to highlight the fact that there are
nearly 10 million extra people to feed in the country, leaving Western Germany far
from self-sufficiency.96 Grunbacher, points out that self-sufficiency was never
attainable, as it not was not achieved before the war and that the promotion of
German products abroad was the only way for West Germany to feed its population
in the long term, thus returning to it’s previous economic state.97 The lowering of
trade barriers and tariffs imposed on German products as a condition for receiving
Marshall Plan aid, meant that the United States directly participated in the control of
the sale of German products, which also helped the food situation.98
Another basic need in addition to food is shelter, thus leading us to consider
the housing situation in West Germany. The reports of the military governor states
that at least 2.25 million places of residence were destroyed during the war, which
was an already catastrophic situation.99 This, coupled with the buildings that were
only damaged, the booming population and the millions of refugees’ means that
there was a vast amount of housing to be built.100 This leads to large amounts of
spending in the construction sector, for example 3.8 million DM were spent in 1950.
However, only 245,000 DM of this was out of the ERP funds.101 The development of
96 Monthly Reports, special report on the Marshall Plan, Fifth and Sixth Report, roll 6, p.57 .
97 Grunbacher, Armin. 2012. "Cold-War Economics: The Use Of Marshall Plan Counterpart Funds In Germany, 1948–1960". Cent Eur Hist 45 (04): 697-716, pp.711-712.
98 Manfred Knapp, Wolfgang F. Stolper and Michael Hudson ‘Reconstruction and West-Integration: The Impact of the Marshall Plan on Germany’. In Journal of Institutional and Theoretical Economics, 137(3) (September 1981), pp.427-428.
99 Monthly Reports, special report on the Marshall Plan, Fifth and Sixth Report, roll 6, pp. 72-73.
100 Monthly Reports, special report on the Marshall Plan, Fifth and Sixth Report, roll 6, pp.72-73.
101 Monthly Reports, special report on the Marshall Plan, Fifth and Sixth Report, roll 6, p.77
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low cost construction and standardised houses managed to multiply the amount of
homes being built, with the amount of new houses between 1946 and 1950
estimated at least 1 million, in the American sector alone.102 However, Grunbacher
estimated that this was a result of pressure from the United States on certain areas
such as the Rhur coal mining areas to increase production, as the Korean war, which
started in 1950, put pressure on the US’s coal supplies103, and that other areas were
also targeted to avoid political unrest from those outside the coal industry. He states
that the relatively small amount of funds provided by the ERP gives the ECA a
“massive say in the construction of houses” which they used to heighten living
standards as a way of repelling the communist movement and of growing the coal
industry104, reducing their motives from humanitarian to nothing more than a different
form of propaganda and self-interested decision, which could be argued is a part of
any decision taken by the united States at the time.
The situation in West Germany did change during the period of influence of
the ECA, even though the funding provided had limited effects. To put the situation
into context, it is important to consider the situation in East Germany and how both
zones affected each other.
As part of the chain reaction to the Marshall Plan, the ‘Molotov Plan’ changed
both the Federal Republic of Germany (FRG) and the German Democratic Republic
(GDR) on both political and economic perspectives. The GDR as an economic unit
102 Monthly Reports, special report on the Marshall Plan, Fifth and Sixth Report, roll 6, p.78.
103 Grunbacher, Armin. 2012. "Cold-War Economics: The Use Of Marshall Plan Counterpart Funds In Germany, 1948–1960". Cent Eur Hist 45 (04): 697-716, p. 704.
104 Grunbacher, Armin. 2012. "Cold-War Economics: The Use Of Marshall Plan Counterpart Funds In Germany, 1948–1960". Cent Eur Hist 45 (04): 697-716, p.705.
30 | P a g e
entered the Comecon in 1950, and soon became one of the leading members in this
organizations. However, the effect on the Federal Republic was also significant but
difficult to measure. The following paragraph will evaluate how Soviet’s reaction to
Marshall Plan affected the economic and social development of Germany.
USSR’s attitude towards the Marshall Plan was not negative after Marshall’s
Harvard speech. After a total war which made serious damage to the country, Soviet
leadership did not aim to create tension and confrontation between the capitalist
western world and communist countries. At early 1947, Soviet Leaders tended to
accept American Aid due to its huge economic destruction in war. In June 21 1947,
Politburo of the Communist Party passed a decision which agreed to give a positive
answer to the Paris conference. The next day, Soviet ambassadors in Poland
Czechoslovakia and Yugoslavia inform the three governments that they were
allowed to discuss the Marshall Plan at the Paris conference in 1947.105
However, after several analyses and researches on Marshall Plan, the soviet’s
attitude to the American aid rapidly changed. Eugen Varga, the famous Hungarian
communist Economists, pointed out in his report to Molotov that Marshall Plan was a
tool which the United States would use to solve their productivity surplus and
prepare the coming economic crisis. Novikov, the Soviet Ambassador in USA stated
the anti-Soviet Political background of Marshall Plan in his letter to Soviet leaders. In
July 1947, Soviet Foreign Minister V. M. Molotov walked out of a meeting with
representatives from the British and French governments, sigaling the Soviet Union’s
rejection of the Marshall Plan.106 At the same time, Eastern European countries were
forbidden to join the Plan or received American aid. In order to avoid American
105 Decision of the CPSU CC Politburo, 21 June 1947 (1947), Archives of the President of the Russian Federation (APRF), fund 3, inventory 63, case 270, list 12. Cited from Narinski (1993), The Soviet Union and The Marshall Plan
106 Narinski, M. (1993) The Soviet Union and The Marshall Plan
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financial and political influence among Eastern European countries, USSR
introduced the Molotov Plan in its sphere of influence, which was viewed as the
answer and alternative to Marshall Plan for the socialist nations under Soviet Union’s
domination.
The Molotov plan was created by the Soviet Union in 1947 in order to
reconstruct Eastern European nations which were politically and economically allied
to the USSR. It was a system made by trade agreements between Soviet Union and
Eastern bloc countries. Financial aids and food aids were also include as well as the
introduction of central planned economic theory. This Economic Recovery Program
in socialist group eventually expanded to become the COMECON in 1949, which
was the most well-known and powerful international economic organization in
socialist world until 1991. The main critique of Molotov Plan and Comecon was that
these Economic Recovery Programs are based on USSR’s own interests and
ambitions, due to the fact that former Axis nations in Eastern bloc still need to pay a
large amount of reparation while they are aided by Russia. Western economists and
politicians therefore criticized the Molotov Plan and Comecon as the tools to obtain
economic and political control over Europe, and to loot the resources of European
nations for the recovery of Soviet Union itself. Berger even blamed the strikes in
France and Italy on Molotov Plan.107 However, data from both primary and secondary
sources tells that Soviet Union did provided aid to support socialist countries with
financial difficulty. Also, for most of eastern European countries (except East
Germany), close economic relationship with USSR and the formation of Comecon
provided a stable market for their industrial and agricultural product, avoid the
competition with Western nations which have significant advantages on industrial
107 Berger, M. (1948). How the Molotov Plan Works. The Antioch Review, 8(1), p 17-25.
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efficiency and technology.108
The implementation of Molotov Plan and Marshall Plan had clearly contributed
to an inevitable confrontation between capitalist Western and Socialist Eastern
Europe. Supported by many historians, the Soviet Rejection of Marshall Plan is
viewed as the origin of Cold War.109 The hope of German reunification had
disappeared in both West Germany and Eastern Germany. The Geopolitical and
international economic structure in Europe had totally changed, which largely
affected both West Germany and East Germany.
Graph 1.0: CZECHOSLOVAKIA. Russian-Czechoslovakian border. Cerna.
1948. Following the Molotov plan, the Soviet foodstuffs are unloaded in Cerna train
station.
108 Zauberman, A. (1964). Industrial Progress in Poland, Czechoslovakia, and East Germany, 1937-1962. p 300, 313,
109 Roberts, G. (1994). Moscow and the Marshall plan: Politics, ideology and the onset of the cold war, 1947. Europe‐Asia Studies, 46(8), p 1371-1386.
33 | P a g e
Source: Magnumphotos http://www.magnumphotos.com/Catalogue/David-
Seymour/1948/CZECHOSLOVAKIA-The-Molotov-Plan-is-on-1948-NN141151.html
The East Germany was directly under Soviet Union’s control after the War. It
was also the most geographically western nation in Soviet’s sphere of influence. As a
result, Soviet’s policies and the attitude towards Western countries could significantly
influence both the economy and politics of Eastern Germany. Before the Marshall
Plan and the Molotov Plan, the possibility of German unification existed. In this case,
socialist characteristics in economy and society might disappeared soon as seen in
Austria, which had a similar situation with Germany (Territory was occupied and
divided into 4 zones, and Wien was also divided and located in Soviet zone).
However, the tension between the two blocs made the Soviet Union decide to turn
Eastern Germany into an absolute socialist country and become an important
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member of socialist economic group.
During the Soviet occupied period, the economic structure of East Germany had
experienced a huge transformation. Traditionally, East Germany’s economy was
propped up by small and middle sized businesses. However, by the establishment of
a 2-year plan in 1948, 39% of enterprises in East Germany were nationalized, and
by then, 99% of the mining industry and 54% of the metal industry were owned by
the state.110 Also, large estate owned by Prussian Junkers were abolished. The land
ownership of large land owners (owned over 100 hectares of land) reduced from
30% in 1939 to 9 % in 1946, and cease to exist in 1948 (ibid). These reforms
reduced the economic difficulty of East German government in its early period, but
more significantly, prepared East Germany on the integration into the socialist
economic group. After the implementation of Molotov Plan in late 1940s, Eastern
Germany turned from a typical internal-oriented economy to an external-oriented
economy. The industrial output originally put on domestic trade to other German
regions was rapidly shifted. The division meant that Eastern Germany had lost most
of its domestic market, and had to concentrate its resources on international market,
which was specifically socialist market. Trade agreement in Molotov Plan created a
beneficial environment for this shift. From 1950 to 1953, the volume of Foreign Trade
of Eastern Germany increased nearly 2.5 times from $1.04 million to $2.45 million.111
In late 1950s, East Germany became the 4th largest engineering Products exporter in
Europe, while USSR was the 6th.112 These data show that in around 10 years after
division, Eastern Germany had been the major supplier of manufactories good in
110 Excerpt from an Explanation of the Two-Year Plan for 1949/50 (1948), Dokumente der Sozialistischen Einheitspartei Deutschlands, vol. II, Berlin, 1951, p 22-25
111 United Nation (1958), Economic Commission of Europe (ECE), Economic survey of Europe in 1957
112 Zauberman, A. (1964). Industrial Progress in Poland, Czechoslovakia, and East Germany, 1937-1962., p 287
35 | P a g e
socialist bloc. This rapid increase on foreign trade led to the success on economic
recovery in certain fields. In 1951, both East and West Germany had exceed the pre-
war industrial production level, which were both 115% of the 1938 level. On chemical
production, East Germany recovered even faster. It reached the 1938 level in 1949
and kept the rate of growth while West Germany went over the 1938 level at 1951.113
Nevertheless, changes in economic structures and mechanisms always have
significant costs. For Eastern Germany and the later German Democratic republic,
the new Geo-politics shaped by Marshall Plan and Molotov Plan caused much
greater negative impact compare to other European nations. The Economic
Committee of Europe data (table 1) shows the trade pattern of East and Western
Germany before the war at 1937, Table 1.
113 United Nation (1953) Economic Commission for Europe, Economic bulletin for Europe, 4-5, 1952-1953, vol.4, No.1, p 50-52
36 | P a g e
Source: ECE (Economic Commission of Europe), Bulletin, i/3, p.28, cited from
Zauberman (1964).
This table clearly shows that about half of East Germany’s output was traded to
other German states, and nearly half of the consumption of it was imported from
other German Regions. The division of Germany in the late 1940s meant that East
Germany as an independent economy automatically lost over 40% of its market and
of its source of supplier at the same time. Considering the de facto blockade
between Eastern European nations and Western capitalist countries, this lost can be
much higher on number. The lack of essential industrial resources in Eastern
Germany was specifically obvious. In 1938, the monthly production of coal in Eastern
Germany and West Germany (exclude Saar) was 0.50 million tons and 11.54 tons
respectively, and the monthly production of crude steel was 141 thousand tons and
37 | P a g e
1492 thousand tons respectively. Between 1949 and 1951, the same ratio remained
unchanged.114 This was the biggest difficulty faced by post-war East Germany
economy. At the same time, other relatively developed nations in Socialist group, for
example, Poland, Czechoslovakia and Hungary, had formed tight economic
relationships for hundreds years, traced to the Austrian Empire age. It would be
much easier for these countries to be integrated in an enclosed market. As a result,
in 1950, East Germany still had a lower percentage share of World Trade than its
highly industrialized neighbor: Czechoslovakia, which was 0.72 %. It was not until
1962 when German Democratic republic created an absolute economic advantage in
Comecon countries.115
On the West side, the situation was absolutely different. There are hardly any
direct influence of Molotov Plan and the formation Comecon on West Germany, while
indirectly the division of Germany had undoubtedly made huge changes on economy
and society of this country. Although these change are difficult to illustrate because of
the limited historical material on this topic, it was still a significant joint effect of
America’s intervention in Europe to Germany.
As showed in table 1, Western Germany clearly had a healthier economy in
terms of industrial output after the division of the country. It had a stronger foreign
trade tradition than East Germany, and both export and import of West Germany
were more independent on domestic trade. One of the main reasons for that
independence was the raw and semi-finished materials produced in the Ruhr and
Rhineland. Official data showed that from 1950 to 1953, West Germany had turned
its trade balance from negative 1520 to positive 1286, which showed the division of
Germany did not stop the Federal Republic’s economy from recovering to and even
114 United Nation (1953), bulletin, p 53-54
115 United Nation (1958), Economic Survey of Europe in 1957
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exceeding pre-war level.116
In agricultural field, West Germany also took advantage on its land resources. It
had a balanced agricultural structure and plenty of farm land. In 1947, West
Germany was the second largest meat producer in Europe just behind UK. In 1951,
the meat production increased 3.57 times and became the largest in Europe. It also
took the leadership in Milk butter and cheese production from 1947 to 1951. The
grain production was also high. Although West Germany was one of the major
importer of grain in West Europe, it still have a considerable amount of output. 117
On the other hand, West Germany lost the potential Eastern European market
and a quarter of its domestic market, which was an important negative effect,
especially in period of post-war reconstruction. Eastern countries which were under
the effect of Molotov Plan were a part of the traditional Market of German nation.
According to the United Nation data, the share of Eastern Europe in imports and
exports of West Germany was 12.9 per cent in 1938, and it fell to 1.3% in 1952. 118
The trade activities between West Germany and Eastern European nations were
limited until the fall of Berlin Wall. However compared with the situation in East
Germany, the Federal Republic was able to get access to a much greater global
market in a short time, which led to a more successful recovery. Big business in
West Germany expended their market all over the world, while the Eastern German
state owned companies were highly restricted by political conflict and economic plan.
116 Destatis (2016), foreign trade, : https://www.destatis.de/EN/FactsFigures/Indicators/LongTermSeries/ForeignTrade/lrahl01.html
117 United Nation (1953), Economic Commission for Europe, Economic Survey of Europe since the War, Vol.4, No.3, p 57, 68-69
118 United Nation (1953), Bulletin, p 35
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During the Marshall Plan’s implementation the German industry and economy
was improved in terms of development and recovery. However, the documents of
General Lucius stated that the manner of development of the industry as well as the
political circumstances suggest that Marshall Plan Aid had a larger purpose than
simply helping industries stabilise themselves post World War Two. That purpose
was to improve political and economic relations in Western European countries,
which would help them stabilise their industries and would also unite them against
the overarching threat of the Soviet Union and communist revolution. From the
secondary sources used in this report, it is clear that a strong argument is presented;
the financial aid received from the Marshall plan was not significant in promoting
West German recovery in the trade sector, but that it was rather the political
advantages that the Federal Republic received by being a key asset for the United
States’ promotion of its interests and ideology. The presence of the Marshall plan
definitely had a psychological effect on the population of West Germany. However,
the effect on the living standards was limited and was more of a way for the
Economic Cooperation Administration to gain control over German markets and
spending. Over all, East Germany lost the benefits and aid from the Marshall Plan
because of the Soviet’s rejection of the idea. However, the major damage on its
economy was due to the structural changes and the loss of its traditional markets.
The Soviet aid in the Molotov Plan and the beneficial policies in Comecon did
accelerate the recovery of Eastern German economy, especially on its heavy
industry. However, the inexperienced economic plan and the blockade from West
Europe made the East German economy growth much slower than that in Western
Germany. Nevertheless, the confrontation between East and West did not have as
much negative influence on Western Germany. In contrast, it spared Western
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Germany the competition from highly industrialized eastern European nations,
including Eastern Germany, on the global market. This contributed to a much higher
economic growth rate than the Democratic Republic in both the short term and the
long term. Overall, the Marshall Plan had more of an indirect influence on Western
Germany’s economic and social state and enable the United States to heavily
influence the country’s political decisions.
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